Role of alternative finance

Overall size of the market:

In 2015, Ireland raised about EUR 3 million with alternative finance. The country has no impressive records with respect to crowdfunding. This is highlighted also by the low amount of per capita volume dedicated to alternative finance compared to GDP per capita.

FundIt.ie (donation and rewards) is run by Business to Arts, a not-for-profit organisation working to support resilience and transformation in the cultural sector. FundIt is presently supported by The Bank of Ireland

iCrowdFund.ie (donation and rewards) was launched in 2014. It is a module of iDonateConnect, which supports over 1,400 non-profit organisations in Ireland with fundraising initiatives.

Linked Finance (peer2peer) is the leading P2P platform in the country at the moment. Through this platform thousands of local lenders provide business loans to Irish SMEs.

CoFunder; (peer2peer) finds its origins in SeedUps and has operations in Ireland, the UK and USA. CoFunder provides peer-to-peer lending to growth based companies looking to expand but who lack the capital to do so.

SeedUps is the only platform dedicated to R&I areas, and it focuses on technology startups.

Evidence

Equity-based crowdfunding

Firstly, it is posited that due to perceived risk and lack of regulation, equity crowdfunding has yet to find traction in the Irish market. Secondly, the question remains as to whether or not other non-equity types of crowdfunding require specific legislative provision in Ireland.
Expert opinion: Eoin Cullina in http://www.crowdfundinghub.eu/current-state-crowdfunding-ireland/

Reward and donation-based crowdfunding

Rewards and donation crowdfunding are not currently regulated in Ireland. Crowdfunding has been discussed in parliament as an important future source of funding, but there is no proposed legislation or regulation currently being considered

Lending to corporates is not a regulated activity in Ireland. As for lending to consumers, a crowdfunding platform that provides such a service could be considered a "credit intermediary", falling under the provisions of the Consumer Credit Act of 1995, and would therefore have to obtain an authorisation as such. It should be noted that is not a difficult process to obtain such an authorisation, since the process is more of a notification than a real application for authorisation.

Regulatory Context

Evidence

Is there a specific national regulation in place applying to crowdfunding?

No

General regulation

- Lending to corporates is not a regulated activity.
- Arranging credit for a person acting outside his business may require authorisation as credit intermediary.
- Crowdfunding platforms cannot use term “bank” or any variant of that term in their names or advertising.
- Crowdfunding platforms must be careful not to provide MiFID investment services such as receipt and transmission of orders and / or investment advice. Non-MiFID investment services which are regulated under the IIA should also be avoided. Of these, the provision of investment advice which includes advice on where to get advice would be relevant for Crowdfunding platforms.

Prospectus requirement may apply depending on the structure and amounts raised by issuers, however, exemptions are available.

Support policies

Overview:

The harmonisation would introduce the protection applicable to investors or consumers for other financial products, into the Crowdfunding space.
“Fintech” is becoming an increasingly important area of focus for business and regulatory attention which provides an opportunity to encourage a standardised approach across the common market
Consideration for internal Member State company law positions .

Main policy institution responsible in the country (ministry in charge of alternative finance):

Central Bank of Ireland

Evidence

Matching funds initiatives

State-aid

Tax benefits

Crowdfunding guidelines for entrepreneurs / investors

Guidelines for researchers on crowdfunding for R&I

Public sponsored research has looked at the prospect of using crowdfunding in Ireland to assist national scientific research funding agencies.
Cullina, E., Morgan, L. and Conboy, K. (2014), “The Development of a Public/Private Model for the Crowd-funding and Crowdsourcing of Scientific Research Projects”,SIG Prag.

Additional insight

Success story of crowdfunding platfroms for R&I:

NAME:FundIt
DESCRIPTION: generic crowdfunding platform founded in 2011 and it has one of the highest success rates for rewards-based sites anywhere in the world. It is based in Ireland, run by Business to Arts, a not-for-profit organisation working to support resilience and transformation in the cultural sector through research, innovation and partnership. The strong points include the following. This is a not-for-profit organisation so only basic fees are charged. Furthermore, the success rate that has never dipped below 71% give more confidence to the investors. FundIt also make at least one phone conversation with a project creator to talk through the project idea, test the fundability, check the campaign and communications plan and ensure your network is primed and ready to support your idea.
LINK: http://fundit.ie/browse

Success story of crowdfunding projects for R&I:

PROJECT NAME: Solar Water Disinfection
PLATFORM: FundIt.ie
DESCRIPTION: The solar disinfection unit is a low-cost, low-maintenance system, which requires no energy to run, and uses one of the most abundant resources in the developing world, sunshine. Drilling a borehole to provide an alternative water source in Ndulyani,Kenya, which will allow the solar disinfection system to be reinstated, will be a major step forward in developing this sustainable and environmentally-friendly water treatment solution. The funds raised will allow over six hundred people to access safe and reliable drinking water.
LINK: http://fundit.ie/project/solar-water-disinfection

Through recent financial crises, Irish businesses, charities and artists have looked to crowdfunding to overcome challenges in financing projects and ideas (Kennedy, 2011). In recent years there has been increased interest from organisations in the area of crowdfunding both at a public and private level. Several noted crowdfunding platforms can be found both in The Republic of Ireland and Northern Ireland such as ‘iCrowdfund’ and ‘Seedups’ (Coyne, 2016, Faulkner, 2016). Furthermore, public sponsored research has looked at the prospect of using crowdfunding in Ireland to assist national scientific research funding agencies (Cullina et al., 2014).

Coyne, P. (2016), “iCrowdfund‐Flexible Online Crowdfunding”.

Collina, E., Morgan, L. and Conboy, K. (2014), “The Development of a Public/Private Model for the Crowd-funding and Crowdsourcing of Scientific Research Projects”,SIG Prag.

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